Inditex showing how to do it: rapid and profitable growth continues

The Spanish fashion giant Inditex has once again reported strong growth, which is coming on top of a strong previous year. The strong growth also comes with improved profitability. With gross margins of over 60% and still improving (60,1% -> 60,5% gross margin), Inditex is standing out in the retail marketplace.

The growth in revenues and improved margins alongside cost controls lead Inditex to increase its EBIT profitability by 43%.

Besides the strong growth and the improved profitability, another sign of capable management from Inditex is the management of supply chains. The company has been able to reduce inventory levels while growing both the top and bottom lines. During the last six months, inventories have grown significantly slower than revenues. Most of the other retailers pushing their inventory levels down (Target, Nike, Home Depot…) have, at the same time, had to cut the margins.

The company stated that strong growth has happened throughout all geographies, banners, and digital and physical channels. The management also emphasized how much the company had done to control costs and keep them in check as the growth continued.

A lot of upside despite big growth

The Inditex business is in an interesting position. It has grown rapidly for a long time but still represents only a small part of the overall fashion market. This provides big revenue growth potential in many of the biggest markets in the world (China, US…).